Utility in WTP Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps
AbstractDestination choice models with individual-specific taste variation have become the presumptive analytical approach in applied nonmarket valuation. Under the usual specification, tastes are represented by coefficients of site attributes that enter utility, and the distribution of these coefficients is estimated. The distribution of willingness-to-pay (WTP) for site attributes is then derived from the estimated distribution of coefficients. Though conceptually appealing this procedure often results in untenable distributions of willingness to pay. An alternative procedure is to estimate the distribution of willingness to pay directly, through a re-parameterization of the model. We compare hierarchical Bayes and maximum simulated likelihood estimates under both approaches, using data on site choice in the Alps. We find that models parameterized in terms of WTP provide more reasonable estimates for the distribution of WTP, and also fit the data better than models parameterized in terms of attribute coefficients. This approach to parameterizing utility is hence deemed promising for applied nonmarket valuation.
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Bibliographic InfoPaper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 06/15.
Length: 23 pages
Date of creation: 15 Dec 2006
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mixed logit random utility parameters; random willingness to pay; travel cost method; destination choice modeling;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources
This paper has been announced in the following NEP Reports:
- NEP-AGR-2007-01-13 (Agricultural Economics)
- NEP-ALL-2007-01-13 (All new papers)
- NEP-CUL-2007-01-13 (Cultural Economics)
- NEP-DCM-2007-01-13 (Discrete Choice Models)
- NEP-TUR-2007-01-13 (Tourism Economics)
- NEP-UPT-2007-01-13 (Utility Models & Prospect Theory)
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